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Saturday, September 24, 2016

Four Histories Of The Right’s 47 Percent Theory

As you’ve likely heard, Mitt Romney was recorded at a fundraiser saying “there are 47 percent who are with [President Obama], who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it […] These are people who pay no income tax.”

The right is splitting over whether or not the 47 percent argument is worth defending. It’s important to understand that, while it is true that 47 percent of households don’t pay federal income tax, the distribution of the tax burden isn’t what the 47 percent theory is about. The 47 percent theory is all about grand political battles. My colleague Mark Schmitt has one examination of where this theory comes from hereBrian Beutler also investigates the background of the 47 percent meme, and Kevin Drum offers a history of the Earnd Income Tax Credit here.

Digging into different arguments, there are two distinct parts to a good 47 percent theory. The first is who creates and sustains the 47 percent as a political agent. This can’t be the bipartisan set of policymakers who wanted to provide income support through work requirements as well as expand certain credits, particularly the child credit; it needs to be agents with specific, outside political goals. Those who pay little or no income tax are a coherent group that acts like a special interest or a class. Instead of the young and the old, as well as the working poor moving into and out of the EITC, this group of people is stable enough that it can act as a coherent political class, but it needs to be created and sustained. Who made it?

The second part of a good 47 percent theory is that the consequences need to be terrible because the stakes are so high. Rather than successfully transitioning people out of poverty and into work, the consequences are negative for our country. But how high are those stakes, and what do they represent?

Let’s start at the beginning. Where does this meme start?

1. Trickle On Trickle Down: The Lucky Duckies of the Wall Street Journal Editorial Page: Let’s look at the Wall Street Journal‘s opinion page, November 20, 2002, “The Non-Taxpaying Class: Those lucky duckies”:

“Who are these lucky duckies? They are the beneficiaries of tax policies that have expanded the personal exemption and standard deduction and targeted certain voter groups by introducing a welter of tax credits for things like child care and education […] The 1986 tax reform, for example, with its giant increase in the personal exemption and standard deduction, took six to seven million people off the tax rolls […] This complicated system of progressivity and targeted rewards is creating a nation of two different tax-paying classes: those who pay a lot and those who pay very little. And as fewer and fewer people are responsible for paying more and more of all taxes, the constituency for tax cutting, much less for tax reform, is eroding. Workers who pay little or no taxes can hardly be expected to care about tax relief for everybody else. They are also that much more detached from recognizing the costs of government.
All of which suggests that the last thing the White House should do now is come up with more exemptions, deductions and credits that will shrink the tax-paying population even further.”

This argument was developed in future editorals. A few weeks later, in  “Lucky Duckies Again: Look at who won’t pay taxes under Bush’s plan”, the Journal noted that “No doubt the Bush team proposed this tilt toward lower income taxpayers to mute the class-warrior critics, not that we’ve noticed any lower decibel level.”

Who? Interestingly enough, this looks like an internal fight among conservatives and Republicans. That’s how Krugman read it at the time, and it seems obvious from that last sentence. The Bush tax cuts are going to be across all families, and the editorial is warning that this is the wrong approach. It should focus just on the rich, corporations, and capital income holders. The editorial is clear that they don’t want to raise taxes on those who are exempted from the federal income tax; they just fear that these across-the-board tax cuts will knock a lot of people out of the system.

This was a correct assertion, as this number skyrocketed after the George W. Bush tax cuts. To whatever extent the Bush team didn’t want to do this, they felt boxed in politically. As a top Bush administration official later told Ezra Klein, “Do you think we wanted to include a welfare payment to people who don’t pay taxes and call it a tax cut? No. But that’s what we needed to do to get it done.”

Consequences? The editorial warned that this policy would buy them no room with the “class-warrior critics,” and that’s probably a fair assessment. Repealing the Bush tax cuts has been a consistent goal for Democrats, and their preferred approach is even worse than the Wall Street Journal could have imagined. The Journal just wanted tax cuts on those making over $250,000, and warned about cutting at the bottom end of the spectrum because of the lucky duckies. Now the situation is reversed, and President Obama is looking to keep the tax cuts for those making under $250,000 and repeal the rest.

There’s the idea that as a policy matter workers will simply not care for cutting taxes or for tax reform more broadly. This is why Romney can say “So our message of low taxes doesn’t connect.” But this isn’t played up in apocalyptic terms. The editorials seemed more concerned that the federal tax code will retain its progressivity under this tax cut, rather than the lucky duckies initating a new culture war. This is in stark opposition to:

  • Justin Napolitano

    Wow, I didn’t think it was possible to put that much baloney in one article. The simple fact is that if you don’t earn any money you can’t pay any taxes. You do remember the old saying “you can’t get blood out of a turnip” don’t you? There are reason, beyond just the Bush and other tax cuts, that has 47% of workers not paying income taxes but it still comes down to not earning enough money to reach the income tax threshold; a threshold that, through the years, moved up because of deductions in the tax code and adjustments for inflation. But while those inflation adjustments and deductions were being implemented wages were not increasing at the same rate for million of Americans. If you want more of the 47% to pay income taxes all you have to do is increase their wages and income. I read today that the minimum wage should be raised to at least $10.00 and hour just to be equal, after inflation, to what it was in 1986 but even that may not allow most to reach the threshold.
    So, it boils down to two things, lower the tax threshold or raise incomes. I like the raise incomes solution because it also increases the amount of money being paid in payroll taxes which helps Social Security and medicare.
    Forbes magazine recently showed that the 400 richest Americans increased their wealth by 13% or 221 billion dollars in just the last year. Suppose that 221 billion dollars went to middle class workers incomes, maybe some percentage, of the 47%, would have reached the tax threshold?

    • phantomoftheopera

      ah, but some of them (the no tax payers) made lots and lots of money, but know how to avoid taxes.

      i do agree with you about wages. when i taught i had families where both mom and dad worked, each working 2 or 3 jobs, but still qualified for free lunch. something is wrong there! (and for all you anti-immigrant people, they were all immigrants. our whites did nothing like that.)

      • bobbreinig

        so you must be talking about the 7%of millionaires that are not paying taxes,, or maybe the corporations ,if a working family doesn’t pay taxes its because they don’t make enough to be taxed ,, but to you they are so lucky to get to work 3 or 4 jobs to make ends meet , and they must be so rich now ,,but your reasoning is just false ,, if they were makeing that much money then were they legal or illegal immigrants

        • phantomoftheopera

          no, no, no i think it’s awful that, even with that many jobs, they STILL aren’t making enough to pay taxes! and romney has the gall to write them off as freeloaders on government!

          doubt if he calls the millionaires who avoid taxes freeloaders!

      • anyasnote

        Food for thought 4 U.
        My daughter’s neighbor and friends
        Both work earning $8.50 hr and 9.50 that $340.00 a week and $360.00 take 25% for taxes, SS, Medicare etc.both take home $2800.00 a mo bef.taxes, $2060, after taxes and they have 2 simple cell ph .no frills AT&T (no landline). $78.00 a mo 2 kids and one in day care – cost $700.00 a mo, utilities, ins. and 1 car payment’s almost $750.00, rent 1050.00 a mo, basic cable and no internet. Their expenses and all not breaking even but less , no money for food and clothing. He got a p/t job making (.00 hr and works 20/25 hrs a week It would be better for them to quit their jobs and go on welfare or move to a slumlord area. They opted to stay on their jobs, live in decent neighborhood and raise kids as good as possible. They are on Sect. 8, and Section 8 pay part of their rent (375.00 a mo) they pay the rest, one child have discounted meals at school. They shop at Goodwill and you would never tell these kids are poor. They are clean, smart, and their parents with them all the time, to make sure that they have the basics. The 3 yr old little girl got a doll for her birthday and a tricycle, she was so happy that she rode that bike until almost fell asleep on it and wanted to sleep with it. If he makes more then Sect.8 will cut off even the 5-10.00 extra. $5-10 bucks for one family is a lot, for R/R a freckle on their butt.
        They rent the house a small ranch and they keep it as it’s their own, never missed payment. So they are getting$ 375.00 a mo from the state coffers and R/R call them moochers. Some of you think they should pay more in taxes??They already paid their taxes through work, and hardly gets anything back because they don’t have a dancing horse to write off, they did not bankrupt anyone and profited from it, all they have is 2 kids and hardly get anything back. Their tax rate is much higher than R/R.
        I guess they are moochers, ripping off GOP of $375.00 a mo.
        It would be better if they just stay home and just produce babies and stay on welfare and stick it to taxpayers to a tune of $2060.00. + a mo. R/R math is a little fuzzy and so is the logic. By the way, Corporations and Oil Corp. are the biggest welfare/taxpayer dole recipients, they are the moochers. Get real. Most immigrants own little businesses and don’t mooch off government. look around.

        • phantomoftheopera

          oops. i guess i didn’t get my point stated very well.

          1st, some of the moochers are millionaires, but i bet r/r wouldn’t count them.

          2nd, some of the “moochers” are hard working families whose income doesn’t get them up to a level where they have to pay taxes. this is probably who r/r refer to. but, it’s wrong, wrong, wrong that companies don’t pay enough for families to live decent lives.

          i believe that government should support working families, old, infirm, disabled. it’s not mooching–it’s getting help that morally should be provided.

          on the other hand, for millionaires to not pay their fair share IS mooching. r/r are the moochers, as are many of their supporters.

          hope this clears up my thinking.

      • Sounds like racist Phantasmagoria — How white of you —

        • phantomoftheopera

          i actually found my white parents harder to deal with than the immigrant ones–who wanted the best for their child. i just didn’t state my feelings adequately.

      • Check out the Stats — Most recipients of food stamps identify themselves as White/non Hispanic

        If you taught English Composition and Social Science , no wonder why the wheels are coming off of our Civilization —

        • phantomoftheopera

          no, no, no. you actually agree with my point–the immigrants (who could be asian, you know) work harder than whites.

          you just misunderstood me.

    • So, Forbes magazine reported that the top 400 richest American families increased their wealth by 221 BILLION dollars in just the last year, and that amounted to an increase of 13%.

      Then that makes the net worth of the 400 richest American families something around ONE TRILLION, SEVEN HUNDRED BILLION dollars.

      Put in other words, those 400 families averaged about FOUR BILLION, TWO HUNDRED FIFTY MILLION DOLLARS of net worth each.

      AND THEY CALL THE WORKING POOR THE “LUCKY DUCKIES?”

  • Phanto – Stick to your prejudiced principals on Immigrants, because you only changed your tune when confronted with misinformation and bigotry !

    • phantomoftheopera

      no i didn’t change ‘my tune’. the misinformation and bigotry is coming from rich whites who want all the money to themselves. i have found immigrants to be hard working, honest, nice people. more so than the poor white families i’ve had to deal with.

      now, my question–jimmyboy. which side are you on?